Groupon.com is planning an initial public offering on November 1st, a high anticipated stock release. Groupon is an electronic commerce service that offers users daily deals to local or national companies. Some deals, for example, offer a buy one, get one free burrito sale at a local Mexican restaurant, or $20 worth of merchandise from Barnes & Noble for only $10.
Other specialty websites offer deals in specific areas like travel and retail, but Groupon covers everything. Its wide variety makes it extremely attractive.
One University of Maryland student, with limited spending money, takes advantage of the diverse collection of sales and discounts, and admires the company’s business plan.
“The design of the system encourages collective buying power,” said Ari Hock, a junior marketing and supply-chain management double major. “Both the businesses and customers have the same goal – to get as many people as possible to purchase the deal.”
Current estimates value the company at around $11 billion. This is far below from this summer’s figures of around $25 billion, and business analysts worldwide are debating whether it’s a good idea to invest in this Internet darling.
Groupon has a lot of work to do to inspire consumer confidence, according to Dun & Bradstreet tech specialist Lee Simmons, who spoke with the technology blog VentureBeat.
Regarding Groupon’s strategy for sustainability and profitability, “they need to show that they are getting their overhead under control,” Simmons said. “In many ways, they’ve begun to show evidence of this by getting their marketing expenses under control and narrowing their losses.”
Some analysts have pointed to the stiff competition within the daily deal industry. After Google tried to purchase Groupon for $6 billion last year, the Internet giant launched Google Offers, a service extremely similar to Groupon. Amazon and LivingSocial also provide the same coupon deals, and have eaten away a chunk of Groupon’s profits.
Hock thinks Groupon should use strategic marketing to separate itself from its competitors. “They should have an advertising campaign proving they’re the biggest, the best, and the first,” he said. “The others are trying to catch on, so they need to differentiate their business model.”